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Sunday, 7 August 2016

Stories we should be thinking about

Ahead of the new working week here are a few finance and related stories to be thinking about.Macro matters:

A bit of a mixed week in markets...

...but it did not stop the VIX index from falling to a year-to-date low...

...and the Nasdaq index to a new recent high:

And of course those pretty strong non-farm payroll numbers have raised hopes of higher US rates sooner rather than later (46% probability by the end of the year):

I am not convinced rates will go up though. Of course it was a week of stimulus action although in equity terms it helped the UK market much more than the Japanese one. Undoubtedly the weak Pound helped out - it strikes me that over caution re the UK currency is a distinct possibility:

Reasonable to think that demographics is having an impact...but the worst is surely to come...and fascinating to see how positively different the US is compared to other parts of the world:

So given this backdrop then taking on student debt is fine...if you can pay it back in a
non-onerous fashion of course (link here):

A few other stories. First oil and "if Iran is successful it will leave SaudiArabia & Kuwait as the only oil producers determined to go it alone" with foreign investment. Fascinating story (link here) and hugely influential potentially on oil supply.

In Europe, "Italy's highest court is set to give a green light on Monday
for a national referendum due to take place in the autumn on a major
constitutional reform, daily la Repubblica reported on Saturday...The referendum, in which people can vote on a series of
changes to the country's constitution, will be a big test for Prime Minister
Matteo Renzi's government" (link here). Another big upcoming test for Europe coming up...

Meanwhile in China-US relations “This is the new digital Silk Road”. Interesting read about the perils of too much
cash in the technology space (link here ):

Amazing compression of the change in cost in renewable power:

Hong Kong-based Bitfinex said all users will lose 36 percent
of their deposits after the bitcoin exchange concluded its review of a $71
million hacking attack (link here). Ouch!

Sector and companies: European banks have generally struggled against their US peers in this graphic from the weekend Financial Times:

Still generally global banks are in a better position than a few years ago. I still feel financials are an interesting investment from a stock picking perspective:

I liked this via Fast FT on some interesting metrics from the latest Vodafone corporate bond issue:

Vodafone managed to slash the yield of the 40-year bond by
18 basis points from initial guidance to 3.01 per cent, according to BNP
Paribas, one of the banks on the deal.

That’s 39bps lower than the yield on the £800m 33-year bond
it issued on Monday, writes Joel Lewin.

Even that elevated 3.4 per cent yield was a record low of
sorts- it was the lowest ever achieved by a triple B-rated sterling issuer at a
maturity of 30-years or more.

As investors raced to get into the market ahead of the BoE,
the orders flooded in for Vodafone’s deal, culminating in a total orderbook of
£3bn, three times larger than the final deal size.

The BoE’s announcement coincides with the largest weekly
inflow ($9.2bn) into global investment grade corporate bond funds in almost
two-years, since October 2014.

Before this week Vodafone hadn’t issued a sterling bond
since 2009, but now it has enjoyed two record breaking visits to the market in
the space of a few days.

Wow...rising debt at the average larger cap oil company. Got to be careful re the paying of some of those big dividends selected of those companies pay:

At least the oil companies typically make profits...unlike Tesla

And a few stories from today's Sunday Times:

Rolls Royce has launched a fresh drive to draw a line under allegations that it paid bribes to win contracts

Anang Insurance Group...has held talks with City bankers about a potential takeover bid of InterContinental Hotels Group...it would ranks as one of the largest ever Chinese deals in Britain

The boss of challenger bank Aldermore is set to strike a defiant tone this week amid concerns that an economic downturn after the vote to leave the EU will undermine the fledgling business.